Pricing, screen size are key factors behind consumer mobile data consumption

How operators price their data plans and the size of a device's screen are two factors that play a critical role in how much mobile data consumers will use. These are just a few of the  interesting tidbits that caught my eye when I was reviewing infrastructure vendor Ericsson's (NASDAQ:ERIC) annual "Traffic and Market Report" released yesterday.

The report, which Ericsson said is based upon research it has been conducting with its clients but only started releasing publicly last year, is packed full of stats about LTE proliferation, data consumption and smartphone penetration.  

Not surprisingly, Ericsson considers data pricing one of the most important factors affecting mobile data traffic. The company noted that data usage on older smartphones can be higher than data usage on newer smartphones (despite the fact that the newer phone might have more advanced capabilities) solely because of the data price plan that the consumer is currently paying. For example, some consumers may have older smartphones but are grandfathered onto unlimited data plans and therefore will use more data than someone with a newer smartphone on a tiered data plan.

The company estimated that the average, high-traffic smartphone user today consumes 500 MB of data per month. The company predicted that figure will grow to more than 1 GB per month by 2017.

Of course, price plans will play a critical role in that growth. When I spoke with Ericsson CTO Ulf Ewaldsson about the report he said that there is a lot of momentum behind tiered data pricing globally, and the market is becoming much more segmented because of this move. 

Interestingly, Ewaldsson also said that the company's research found that the larger the screen size, the more data a customer consumes. And he isn't just talking about tablet and PC users consuming more data than smartphone users. He's saying that some of the new, large-screeen smartphones, or "phablets" as some are calling devices like the Samsung Galaxy Note or LG Vu, are driving more usage. "The bigger the screen, the more data you use," Ewaldsson said.  

These larger screen devices tend to have more processing power and the end result is a better customer experience, according to Ewaldsson. That improved experience drives consumers to use more data--in particular, to watch more video, which consumes a lot of bandwidth on the network. 

Video consumption is growing, according to Ericsson. The report said that a user on a data plan of around 15 GB per month consumed an average of 2.3 GB of online video per month in the first quarter of 2011 and that grew to 3.5 GB of online video per month by the fourth quarter. Meanwhile, other activities like web browsing and peer-to-peer file sharing remained fairly steady.

Ewaldsson said that the company believes that consumers will continue to view more video on their mobile devices, but he said that mobile operators need to make the viewing experience better.

Regarding network capacity, Ewaldsson said that Ericsson believes that if operators deploy more heterogeneous networks to complement their macro networks, they will be able to handle the additional traffic and provide good coverage and a good quality experience at least through 2017. Ericsson sells infrastructure equipment and currently has 38 percent market share globally.

Ericsson's annual report doesn't offer any big surprises or shocking predictions, however it does reinforce some of the trends we've been seeing over the past few months. Namely, tiered data prices are here to stay and bigger screens lead to more data consumption. --Sue